We're Not Counting On Overseas Shipholding Group (NYSE:OSG) To Sustain Its Statutory Profitability

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Overseas Shipholding Group (NYSE:OSG).

While Overseas Shipholding Group was able to generate revenue of US$419.6m in the last twelve months, we think its profit result of US$41.8m was more important.

Check out our latest analysis for Overseas Shipholding Group

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Overseas Shipholding Group's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Overseas Shipholding Group.

The Impact Of Unusual Items On Profit

To properly understand Overseas Shipholding Group's profit results, we need to consider the US$18m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Overseas Shipholding Group's positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Overseas Shipholding Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Overseas Shipholding Group'searnings a poor guide to its underlying profitability. For this reason, we think that Overseas Shipholding Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Overseas Shipholding Group you should be mindful of and 1 of these can't be ignored.

Today we've zoomed in on a single data point to better understand the nature of Overseas Shipholding Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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